Receiving a raise at work is an exciting time! There is nothing quite as fulfilling as working hard and having it pay off but choosing what to do with the additional funds is just as important. While some might run to the store for an impulse purchase, there are advisable ways to invest your raise.
For those that are looking to put their raise to good use, see how investments in your future and in experiences can go a long way!
1. Invest in Retirement
The pennies you stack away for retirement today can grow by the time you hit 65. Whether you’ve been proactively saving for years or are new to saving, putting extra money toward retirement can benefit your future self.
Many people choose to put a set percentage of their salary into their 401(k) or other retirement fund automatically. So if your income goes up after a raise, so will the amount of money going into your retirement accounts. But you can take this one step further and raise the percentage you put toward retirement such that all of that new money goes to your retirement fund. You won’t miss the new funds, but your future self will thank you.
2. Purchase Life Insurance
While you may consider life insurance to be a “just-in-case” setup, there are many types of life insurance that allow you to build value (and even build a legacy).
If you’re only aware of term-life policies, asking, “What is whole life insurance?” can introduce you to policies that offer lifelong coverage as long as you continue to pay premiums. With whole life insurance, your beneficiaries receive a death benefit and your policy will have a cash value component that you can access during your lifetime. Spending your raise on either a whole or term life policy can provide your loved ones with security.
3. Conquer Debts
Living with debt can be crippling, especially when trying to get ahead of it. Diverting some funds from a raise to help pay off high-interest debts can be life-changing. Not only can paying off debts put you in a better overall financial position and help build your credit score, it can also significantly improve your peace of mind.
Consider using your raise to pay more than your monthly minimum loan and credit card payments: this not only cuts down on your debt, but it can also reduce interest charges against what you owe by reducing your principal.
4. Invest in Memorable Experiences
If you are confident that your retirement plan, life insurance policy, and debt are all in a healthy place, skip the latest gadget and put your raise toward a great experience.
Whether that puts you in the mountains, another country, or paying a bit more for a VIP experience with your favorite artist, using the money you’ve earned to build lifelong memories is a great way to spend your money. Consider your interests (and those of your friends and family) and build out an experience to last a lifetime.
A raise is often recognition for your consistent hard work. So think about where you want to use those funds and work hard for yourself by researching long-term security and lifelong experiences that resonate with your life goals. When you put your raise towards bigger goals, you are ultimately investing in yourself – and what better way to celebrate that hard-earned raise?